TAIEX drops amid doubts about computer-share rally

Stocks fell for a third day yesterday. AU Optronics Corp (友達光電) paced declines on concern its 59 percent surge this year has outpaced profit growth.

"Computer-related shares have gained too much, too fast," said Celine Chiang (江宜津), who manages the equivalent of $16 million for Polaris International Securities Investment Trust Co's (寶來投信) Chronicle Fund.

"Investors are questioning if the rally can be sustained," she said.

Her fund has gained 11 percent in the past 12 months, compared with the index's 4.8 percent gain.

CMC Magnetics Corp (中環), the nation's largest maker of recordable compact discs, and Ritek Corp (錸德) dropped after a Chinese-language newspaper said prices of DVD-recordable disks will fall as much as 20 percent in the next two quarters because of excess supply.

The TAIEX shed 68.08, or 1.3 percent, to 5,219.30. The index climbed as much as 1.2 percent in intra-day trading. Seven stocks fell for every four that gained. July futures on the index lost 0.3 percent to 5,239.

About 4.5 billion shares changed hands, 9 percent above average trading in the past three months.

The value of trading was NT$94.6 billion ($2.8 billion), 10 percent above the three- month daily average.

AU Optronics lost NT$1.30, or 4 percent, to NT$30.90.

ProMOS Technologies Inc (茂德科技), the nationn's No. 2 maker of computer- memory chips, fell NT$1.20, or 7 percent, to NT$16.Its shares have jumped 67 percent this year.

CMC Magnetics fell NT$1.50, or 5.7 percent, to NT$25, while rival Ritek shed NT$1.30, or 5.1 percent, to NT$24.30.

Cathay Financial Holding Co (國泰金控) fell NT$0.90, or 2.1 percent, to NT$42.70. It will announce as early as this quarter plans to invest in China, a Chinese-language newspaper reported, citing the company. Cathay will form a joint venture with an unidentified Chinese partner to sell insurance, the report said.

Taiwan Semiconductor Manu-facturing Co (TSMC, 台積電) fell NT$1, or 1.7 percent, to NT$57 on news that the company may say third-quarter sales will grow 5 percent from the second quarter as demand recovers. It is scheduled to announce its second-quarter earnings on Thursday, the paper said.